Starting a Bank • Hacker News Board

Re: Starting a Bank

#41

Post by ig1 » Fri, Aug 21, 2009, 5:43 PM UTC

cookiecaper wrote: post #36

m_eiman wrote: post #11

Earlier quoted context omitted.

That just means that there's less competition. And when you start getting successful, your competitors will need to spend a few years implementing their system before they can start actually competing with you. And I wouldn't worry about the big banks catching on to the "do what you can to help your customer" concept, it's not in their culture.

It also means that unless you're starting out with at least $xx million dollars, you have no hope. It can take _years_ to get a business started if you're unlucky enough to choose a field under heavy regulation (something with it's own Cabinent-level bureau, like the FCC, EPA, or Fed). The paperwork takes a long, long time to process, the processes are laden with significant fees, you have to pay staff (usually lawye…

If only there was some sort of fund that would provide capital for ventures for people with ideas and the experience to execute.

Re: Starting a Bank

#42

Post by lamby » Fri, Aug 21, 2009, 7:15 PM UTC

Pretty much all of the points I was going to raise have been covered - I just wanted to add my facepalm at the people in the comments who clearly don't understand a hypothetical scenario.

Re: Starting a Bank

#43

Post by Eliezer » Fri, Aug 21, 2009, 8:02 PM UTC

jobu wrote: post #28

mdasen wrote: post #17

The problem is that his proposals ignore the economics behind banking. If you take someone's money and put it in a vault, how can you provide interest on that money? You can't. You'd, in fact, have to levy fees to cover the costs of staffing, buildings, security, etc. Yes, even an internet bank has to have physical infrastructure somewhere. Heck, why am I going to spend $3 for a SafeBank iPhone app when I can access…

His head is in the clouds. Although, the idea of starting a bank in the middle of a downturn is not bad. People are saving more money than usual right now (cheap capital), and many businesses are desperate for loans. The trick is to weed out the failing businesses, and loan to the ones strong enough to last the downturn. As always, easier said than done... If anyone out there is looking for a "nice" bank, you're much…

Actually, I don't think he understands how banks work, period. They loan the money out. That is where the money comes from. How much money a bank makes is about what sort of loans it makes. Guy talks about "keeping the money in a vault" so he has, roughly speaking, no clue whatsoever how banking works.

Re: Starting a Bank

#44

Post by clistctrl » Fri, Aug 21, 2009, 8:27 PM UTC

ig1 wrote: post #40

webwright wrote: post #29

Earlier quoted context omitted.

"The problem is that his proposals ignore the economics behind banking. If you take someone's money and put it in a vault, how can you provide interest on that money?" Except that he said this: SafeBank would maintain a reserve level 2-3x higher than Fed requirements and any other bank. What he's saying is this. SafeBank would be less risky and could spend a LOT less money. Revenue would be lower, but he's saying tha…

It wouldn't even cover your costs. Most bank current accounts are run at a loss for the bank, and just operate as a loss-leader for other products the banks sell. A current account costs in the region of a couple of hundred dollars a year to run (see countries which charge for current account services). Assuming the bank is making an (adjusted) return of 2% on your money, the account has to have 10k in it even to bre…

thats because the people with > 10k to keep in an account keep it in a brokerage account or some place that pays decent interest.

Re: Starting a Bank

#45

Post by djahng » Fri, Aug 21, 2009, 8:57 PM UTC

"'Bank of America spent $40,000,000 dollars on airplanes last year. We spent $40,000 to develop an iPhone application so you can check your balance from anywhere.' (Hmm, the iPhone app should cost like $2.99.)"

I think he's misunderstanding something...the iPhone app may cost $2.99, but it doesn't cost $2.99 to develop.

Re: Starting a Bank

#46

Post by loltrader » Fri, Aug 21, 2009, 9:34 PM UTC

Eliezer wrote: post #43

jobu wrote: post #28

Earlier quoted context omitted.

His head is in the clouds. Although, the idea of starting a bank in the middle of a downturn is not bad. People are saving more money than usual right now (cheap capital), and many businesses are desperate for loans. The trick is to weed out the failing businesses, and loan to the ones strong enough to last the downturn. As always, easier said than done... If anyone out there is looking for a "nice" bank, you're much…

Actually, I don't think he understands how banks work, period. They loan the money out . That is where the money comes from. How much money a bank makes is about what sort of loans it makes. Guy talks about "keeping the money in a vault" so he has, roughly speaking, no clue whatsoever how banking works.

He's basically talking out of his ass. The commercial banking model is dead and there's no way he could compete with the likes of BoA.

Re: Starting a Bank

#47

Post by alaskamiller » Fri, Aug 21, 2009, 10:13 PM UTC

djahng wrote: post #45

"'Bank of America spent $40,000,000 dollars on airplanes last year. We spent $40,000 to develop an iPhone application so you can check your balance from anywhere.' (Hmm, the iPhone app should cost like $2.99.)" I think he's misunderstanding something...the iPhone app may cost $2.99, but it doesn't cost $2.99 to develop.

He's saying he wants to charge the bank app at $2.99 as a way of generating revenue.

Re: Starting a Bank

#48

Post by jonknee » Fri, Aug 21, 2009, 10:17 PM UTC

trader wrote: post #14

Obviously "matt" has not worked in the finance industry and clearly does not understand how banking works. Sounds decent in theory but in reality the bank would have no investors and would lose any talent when they didnt pay them. They would probably be the cause of the financial crisis by only employing stupid people who gave poor, risky loans.

"Stupid" people couldn't have done any worse than the "smart" "talent" that got us into our current mess.

Re: Starting a Bank

#49

Post by losvedir » Fri, Aug 21, 2009, 10:18 PM UTC

steveplace wrote: post #9

Tichy wrote: post #5

"We take your money and put it in a vault" That's not actually the job of a bank, is it? The job is to mediate lending and borrowing of money. By identifying the right people to lend money to, banks can offer the people whose money the take an interest rate. I still agree that there is a market for a better bank. I remember an example from the book "Why not?" where a bank (or something like that) offered to automatic…

Well why not differentiate the product by allowing the bank customers choose where the money is getting invested, kiva-style. And yes, there is a ton of risk there but it's unique.

Not a "bank", per se, but exactly what you're talking about: http://www.lendingclub.com/

Re: Starting a Bank

#50

Post by losvedir » Fri, Aug 21, 2009, 10:28 PM UTC

The part that's interesting to me is his idea that it will be essentially a "vault" and super safe. The problem is he'd be targeting people under the FDIC limit, so that safety wouldn't be desirable.

But what if he targeted people OVER 100k. (For that matter, let's say he didn't offer loans at all so he really was a "vault") Sure you couldn't offer interest, and maybe you'd even have to charge a very tiny fee, but are there places that do that? What do people do if they have a lot of money -- put in Treasurys? If I had millions of dollars, I'd pay someone to just deposit it with the Fed. I think the Fed even pays interest now.